There are so many free, cheap, and other services like this that it's hard to imagine what a company might differentiate on to become the "next big thing."
PagerDuty is an alerting system which plugs into any monitoring system (Pingdom, Nagios, Cloudkick, etc) and alerts your team via phone, SMS and email when problems are detected. We add advanced alerting features, like 2-way voice and SMS alerts, automatic alert escalation, and on-call duty scheduling to these existing tools.
You're right though, in that many people, on first glance, confuse us with a server monitoring or website pinging system. The "pitch" has gotten better over time, but it's still something we have to work on to improve.
Pingdom already does that. I'm not clear what you're offering here...
Actually, Pingdom is one of the most common services used in conjunction with PagerDuty.
At a higher level, what we're trying to provide is an on-call management and alert dispatching tool. What PagerDuty does is let you control who, how, and when people are notified when problems occur. In contrast, monitoring tools like Pingdom and Nagios focus more on detecting problems. While they have some native alerting functionality, we think with PagerDuty's advanced alerting, they can function all the better.
Maybe you should highlight that? My first impression was "what, yet another pingdom"? Definitely need a bit fine tuning there.
Wondering who will be your main target customer? Any website that has more than one sysadmin?
The only thing that this does that is really new is two-way SMS.
I also think PagerDuty's ability to graphically define the on-call schedule and escalation rules is much nicer than mucking around with Nagios's configuration files, but I'm a bit biased :)